Australian Regulator Cancels License of FTX's Local Arm Amid Cryptocurrency Exchange Collapse

In a significant move, the Australian Securities & Investments Commission (ASIC) has announced the cancellation of the license held by the local arm of FTX, the US-based cryptocurrency exchange that faced a high-profile collapse.

Effective from July 14, 2023, the decision comes in the wake of FTX's filing for US bankruptcy protection in November last year, after it found itself unable to fully reimburse customers who had entrusted funds to its platform.

FTX, which was once a prominent player in the crypto industry with a staggering valuation of $32 billion in January 2023, has since encountered mounting challenges as global regulators intensified their scrutiny of the cryptocurrency market. Founder Sam Bankman-Fried is currently embroiled in a criminal lawsuit by the US government, accused of fraudulent activities. He has maintained his innocence and pleaded not guilty to the charges.

The Australian regulator had taken action last November by suspending FTX's license, which was initially planned to last until May. The suspension revoked FTX's permission to deal in derivative and foreign exchange contracts for both retail and wholesale clients. However, the license cancellation issued this week signifies a more substantial move by ASIC in response to the exchange's ongoing troubles.

Despite the cancellation, ASIC has allowed FTX Australia to continue providing limited financial services to terminate existing derivatives with its clients until July 12, 2024. This provision will ensure that ongoing obligations and commitments are met without abrupt disruptions for the affected users.

The regulatory decision has no impact on FTX Australia's standing as a member of the Australian Financial Complaints Authority, ensuring that the exchange remains obligated to resolve any complaints or disputes lodged by its customers. Additionally, the cancellation will not affect the arrangements in place for compensating retail clients, ensuring a continued avenue for customers seeking resolution for potential grievances.

FTX, on its part, has not yet issued a response to the news of the license cancellation. The exchange's situation has been closely monitored by investors and the cryptocurrency community at large, given its former status as a major player in the industry and the subsequent turbulence it has experienced. The fallout from FTX's collapse, along with the heightened regulatory scrutiny faced by the broader cryptocurrency market, has further intensified concerns about the stability and oversight of digital asset trading platforms worldwide. As authorities continue to grapple with the complexities of regulating the cryptocurrency space, market participants and investors are paying close attention to the evolving regulatory landscape.

By fLEXI tEAM